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Questar Beats on Earnings, Misses Rev

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Natural gas-focused energy company Questar Corp. reported third quarter 2013 adjusted earnings per share of 19 cents, unchanged from the prior-year level and ahead of the Zacks Consensus Estimate of 17 cents. The growth can be attributed to higher liquid price realizations.

Total revenue, at $149.6 million, was up 5.5% from the year-ago level of $141.8 million. However, it was much below the Zacks Consensus Estimate of $270.0 million due to poor performance by the Questar Gas and Questar Pipeline segments.
Segment Analysis
Questar Gas: The segment reported operating loss of $11.2 million, sliding further from the prior-year loss of $10.7 million. The reported loss is a seasonal phenomenon. As of Sep 30, 2013, Questar Gas served in excess of 939,000 customers, representing growth of around 13,000 or 1.4% year over year.
Wexpro: The unit’s operating profit decreased marginally to $40.7 million from the year ago-quarter level of $41.0 million, primarily due to lower production volumes. Quarterly production of natural gas fell 6.2% to 13.7 billion cubic feet (Bcf) from 14.6 Bcf in the third quarter of 2012. Oil and natural gas liquid (NGL) volumes also dropped 10.4% to 147 thousand barrel of oil equivalent (Mbbl). However, liquid sales price were up 19.1%, which somewhat offset the results.

Questar Pipeline: The segment reported an operating loss of $52.6 million against the third quarter 2012 profit level of $32.6 million. The results reflect the effect of an $80.6 million impairment charge, in addition to a drop in NGL revenues and increased operating expenses. The total natural gas transportation volumes were 208.5 million decatherms, down from the prior-year level of 219.6 million decatherms. The drop was partially offset by NGL sales price which moved up 5.9% to $59.01 per bbl.
Expense Summary

The general and administrative expenses for the quarter decreased 15.9% from the prior-year period to $24.4 million, while depreciation, depletion and amortization costs increased 3.3% to $47.4 million. Total operating expense – at $169.0 million – increased 109.4% from the third quarter of 2012, primarily due an asset impairment charge of $80.6 million.


As of Sep 30, 2013, Questar had long-term debt (including current portion) of $1,136.9 million, with a debt-to-capitalization ratio of 51.8%.


In a separate release the day earlier, Questar announced a dividend of 18 cents per share to be paid on Dec 9, to shareholders of record on Nov 15. This marks the company’s 276th consecutive dividend payment.


For 2013, Questar has increased the lower end of the earnings guidance by 4 cents, which now stands at $1.16–$1.20 per share.

Zacks Rank & Stock Picks

Questar currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Apart from Questar, one can look at AGL Resources Inc. , MDU Resources Group Inc. (MDU - Free Report) and Atmos Energy Corporation (ATO - Free Report) which currently holds a Zacks Rank #2 (Buy). These utility stocks offer good value and are worth buying now.

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